Tax changes will harm rental market in rural areas
Posted in Industry News on 01/02/16
With over 50 years’ experience, Wardhaugh has adapted to many changes in the housing rental market in Angus but we are currently facing a combination of tax changes which will hurt small investors, leading to an insufficient supply of suitable rental accommodation to meet demand in the area.
Unlike areas such as Dundee, where the largest demand is for flats, in Angus we see more families looking to rent larger homes. The reasons for families choosing to rent are varied but can include the need to be flexible for employment reasons, concerns over interest rates or simply preferring not to be saddled with the extra responsibilities that come from owning a home.
Providing that type of quality housing in areas like Arbroath and Forfar, in common with other rural areas across Scotland, relies heavily on small investors. Without the commitment of local landlords it is hard to create the necessary supply to meet demand. Sadly, two new tax measures announced in London and Edinburgh have threatened our market here in Angus.
The first, dubbed the “Alice in Wonderland” tax, was announced by the Chancellor of the Exchequer at Westminster and restricts tax relief on residential properties owned by individual landlords to the basic rate of income tax. This will disproportionately harm single-property and small portfolio landlords who, like other businesses, were previously taxed on profit but will now be taxed on their whole income. I find it shocking that landlords with a small number of properties will be hit by this, whilst massive financial operations with thousands of homes under their control will be able to dodge this new tax entirely.
At the same time, the Scottish Government has announced that an extra 3% will be added to the Land & Buildings Transactions Tax (LBTT) for the purchase of second homes. Whilst larger companies will be able to adsorb this cost through complex financial management, it will make life much harder for smaller players with tight margins looking to invest.
The joint effect of these changes could have a devastating effect on the rental market in Angus, driving small landlords out of the area and exacerbating the shortage of available properties. I was recently speaking to one landlord who will be selling his portfolio of 4 properties very soon as a result of these changes.
At Wardhaugh, we are working to make sure our landlords are aware of these changes and doing all we can to make sure still feel able to maintain their properties in the area but it is difficult when many feel victimised and left at a significant disadvantage compared to the larger, impersonal investors from outside our community.
- Amanda Wiewiorka – Director, Wardhaugh Property